PAYGO is Simple: Just Pay for What You Want!

After reading this post, hopefully all of our loyal readers will finally understand the simplicity and beauty of the Pay-As-You-Go (PAYGO) concept.

First, I should mention that today we published an issue brief on the new statutory PAYGO law proposed by President Obama and introduced in the House of Representatives to coincide with today's PAYGO hearing in the House Budget Committee, featuring OMB Director Orszag. This proposal puts in place a law that requires any new spending or tax cut legislation to be offset so that it does not increase the deficit. If it did, the law forces automatic spending cuts designed to balance out the difference.

The Concord Coalition supports enactment of statutory PAYGO. The basic message in our brief is that PAYGO can be, and has been in the past, an important budget enforcement tool that helps promote fiscal responsibility. However, PAYGO shouldn't be thought of as more than that, and certainly not as a silver bullet that can somehow solve the nation's long-term fiscal challenge. That isn't because it doesn't work, but because PAYGO -- by itself -- doesn't cut any spending or raise any taxes. Rather, it just aims to keep Congress from increasing the deficit and digging our hole deeper, as opposed to digging out of the hole we are already in.

Just looking through the Concord archives, since 2004, we have written at least 13 publications where PAYGO rules were the major focus. And that only covers a time period since the law expired! In these publications we spend pages and pages explaining different ways the rules can work, analyzing the different proposals that have come up over the years, and the different ways legislation would be affected by PAYGO. All of that has been important for us to do, especially because it allows us to educate Members of Congress and their staffs as they consider changes in legislation and rules. However, sometimes the basic point of PAYGO can get overlooked in these detailed analyses.

All you really need to know is this: PAYGO rules are designed to force Congress to pay for the things it wants.

It is that simple.

If Congress just paid for the things it wanted, there would be no reason to build these convoluted rules to try and force them into it. We would have no need to learn about points-of-order, exemptions, or sequestration -- boring, technical PAYGO terms. All that has to happen to stop this would be for Congress to get in the habit of cutting spending or raising taxes whenever it wanted to raise spending or cut taxes. Chris Parnell said it best to Steve Martin in that Saturday Night Live skit advertising the innovative financial planning book Don't Buy Stuff You Cannot Afford: "You make sure you have money, then you buy it." (Have we mentioned before that you should see the movie I.O.U.S.A.?)

And sure, we could understand if during genuine economic crises Congress had to increase the deficit (as they did with the stimulus bill). And yes, there still might be some need to discuss the difference between spending in annual appropriations bills (which is not covered by PAYGO) and mandatory spending (which is covered by PAYGO). But really, the main point is still the same. If Congress simply paid for new things, we wouldn't have to worry so much about particular details of particular PAYGO regimes.

In the traditional absence of serious discussion on the Hill about how to attack the country's long-term fiscal challenges, we have often turned to discussing procedural tools to stop the bleeding. Our hope is that Congress might now re-accept those procedures, and then we can turn our full attention to where it really matters -- taking care of those pesky, long-term fiscal challenges brought on by an aging population and out-of-control health care costs, and the hard choices that will be required to solve them.